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Alex's Take on Inflation

April 18, 2022

What’s throwing a wrench in the Fed’s plan to smooth out inflation and increase interest Rates?

 

The Fed’s plan is in action and in the short term we’re going to see resistance to it as foreign affairs add on to inflation and low inventory for dramatic price equity increases over last year’s.

Rising interest rates do not correlate with falling home prices. In fact, the last six times mortgage rates have increased, so have home prices. If you are not in a fixed-rate mortgage or other debt vehicle, then you may see rising payments over the coming months and years.

Seize the moment if you can swing it. The takeaways here are clear: Provided your financial house is in order and your job stability is relatively certain, there’s no time like the present to lock in a mortgage before rates creep higher and reduce your purchasing power. In the Bankrate.com March 2022 Mortgage Rate Outlook, chief financial analyst Greg McBride says “There is little sense in holding out waiting for lower rates when all the risk is tilted toward higher rates. But do not rush into a home purchase just in the pursuit of a low rate if you are not adequately prepared or financially able to handle the responsibilities.”

In 2021, home prices skyrocketed nearly 19%, according to the S&P CoreLogic Case-Shiller home price index. And pros say we’re in for another year of price growth — but as for how much, pros diverge. A basic rule of inflation is that it causes the value of a currency to decline over time. In other words, cash now is worth more than cash in the future. Thus, inflation lets debtors pay lenders back with money that is worth less than it was when they originally borrowed it.

Bottom line, you need to have a plan and a team to execute that for you. Whether you are trying to sell and buy for a new surrounding or to capture appreciation, refinance and lower your monthly payments or, pull out a home equity loan and complete those renovation projects you’ve always dreamed of. The time is now.

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